SCOTLAND ON SUNDAY: Shell in talks to save £220m oil and gas sale (ShellNews.net) 5 Dec 04

RICHARD ORANGE

SHELL and its partner Exxon are in last-minute negotiations with US oil firm Apache and Ireland’s Tullow Oil to rescue the £220m sale of its Schooner and Ketch complex of oil and gas fields.

Bankers expect Shell to make an announcement on the deal this week - but it may still be pulled if neither party is prepared to pay high enough.

Should the sale go ahead it will be the one of the largest asset deals in the North Sea this year.

Gaz de France, whose deep pockets had previously made it the favourite, has dropped out of the bidding over concerns that technical problems would make the field too difficult to operate.

Centrica dropped out last week, joining German utility giant E.on, and Denmark’s Dong oil company - which are all believed to have had similar concerns.

During the bidding three weeks ago, the utilities all bid substantially below £200m, forcing it to go back to bidders.

Tullow and Apache are both thought to be offering around the £220m mark. Before Shell issued the data package revealing the field’s complexities, bids were expected to go as high as £400m.

One of the bidders now out of the process said: "Given the technical challenges that the field presents, whoever buys Schooner and Ketch would need to be someone bold who wasn’t phased by the technical costs."

Apache on Friday denied that it had won the bidding and refused to confirm it was involved. Tullow refused to comment.

Should Apache win, it would cement the entry of medium-sized US and Canadian oil firms as major players in the UK North Sea. Apache made its entry to the UK in April last year with the £320m purchase of BP’s Forties Field, the largest oil field ever discovered in the North Sea. It has significantly increased production with a drilling programme on the ageing field.

Tullow does not have Apache’s record of energetically overhauling deteriorating fields but it could make savings on the cost of transporting the gas from the fields to the UK market because of its ownership of much of the gas infrastructure in the southern region of the North Sea.

The utilities, desperate to secure ownership of valuable North Sea gas supplies as the UK becomes a net gas importer, have already moved on to the next field for sale - the Varg field in Norway, owned by Norwegian oil services firm PGS, for which bids are expected on Wednesday. Centrica and Ruhrgas are among the interested firms.

http://scotlandonsunday.scotsman.com/business.cfm?id=1392682004